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It is Time to Complete Your Inventory

The fall chill is in the air! The leaves are graciously falling from the trees in the backyard. Raking becomes standard work and is a daily chore. You embrace windy days as the fallen leaves journey to your neighbor’s yard saving you clean-up time. As current and future business leaders this is the time of the year most firms vigorously pursue the planning cycle for the New Year. This includes newly created sales and profit numbers, forecasts in support of these numbers and finally the costs required to run the business, including process improvement savings.

During this time of year, managers access their “current state” in relation to levels of capital and human resources. Overlaying this assessment into next year’s business plan is the second step in the process. The final step is deciphering the results to determine gaps. But how does one go about doing this to create an action plan?

Mathematical modeling exists as business analytics take hold within organizations. For experienced managers there is a bit of “gut feeling” thrown into the results. Together mid-level managers create an actionable plan that if executed will meet or exceed company and shareholder expectations.

This is easier said than done. You must try to take into account the effects of environmental considerations on your business or the great unknown. Effective managers must complete an assessment of what assets are under your control versus what you will need for the next planning cycle. The manager must be well-versed in the areas of new products and processes that will be released during the next fiscal cycle. Attention to what is required to implement is the critical output.

Physical assets are straightforward. Do you have what you need to meet the future volume requirements of the business? Manufacturing and service industries look at the same things. Effective capacity of the current physical assets in the business is the input. If expansion of equipment capacity is required is there space?  Regression analysis may be used here to project future output levels.  The need to add equipment is a “step” capacity problem. How large you make that “step” is dependent on your confidence on the accuracy of the forecast!  A physical asset for new product release is a bit trickier. Design requirements are needed and new process controls must be included. As a great example take a look at the transformation of Dunkin Donuts from a historical donut and coffee shop to what they currently offer today.

Assessing human capital is a bit more difficult. Taking a physical inventory of the associates under your control is critical. I found the use of a matrix helpful to determine the bandwidth of the team as well as areas of potential risk. As in any business if there is the “go to” person for a particular process risk. This will become evident in the matrix results which will serve as your human capital “current state” document. Note: This document(s) should already exist, be dynamic in nature, and reviewed for gaps on a regular basis. The second piece of the human capital model is including the needs of the new business plan into this matrix. The manager must ask the following questions. What new skills will be needed to deploy new processes? Is the current skillset of the associates able to meet the future needs of the business? May this be accomplished through training or will new resources be required? How will new technology, software or hardware, be introduced to insure customer quality and delivery are not affected? These among other questions will visualize the gap and enable the manager to begin planning corrective actions.

Now, take a moment to enjoy the change in seasons, anticipate the upcoming holiday season and begin the planning for the next successful business cycle. After all, it begins in less than a few months.

About the Author

Pete Papantos is an operations director at a Fortune 500 company. He is responsible for the global execution of their strategic plan and driving operational excellence using lean methods. In addition, Pete is a graduate instructor with emphasis in operations and strategic management — both in traditional and online settings.